A director is defined as "a director appointed to the Board of a company" under the Companies Act, 2013 (hence referred to as "the Act"). The idea of a 'officer who is in default' is also included in the Act for the purpose of laying accountability on such a person in the event that the firm violates the Act's provisions.
Every whole-time director, director(s) who has given consent for becoming a key person in the absence of any key managerial personnel, and every director who is participating in proceedings relating to a contravention of provisions of the Act and is aware of such contravention fall under the definition of "officer who is in default."
The Act contains various clauses that make a director liable to fines and imprisonment. Misleading statements in the prospectus, failure to repay deposit money to depositors, engaging in any fraud in a company or with creditors, failing to notify stock exchanges about public offers, and failing to maintain proper books of accounts prior to winding up are just a few of the defaults that expose directors to personal liability.
It's critical for independent and non-executive directors to understand that they'll only be held liable if a company's acts of omission or commission occurred with their knowledge, attributable to board processes with their consent, or if they didn't act diligently and there's enough evidence to prove it.
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